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July 15, 2010
Hatteras Island Real Estate: Frequently asked questions By TOM HRANICKA Each year, during the summer when the island is most active, I like to publish an updated version of an article that addresses some of the most frequently asked questions that I hear from prospective buyers and sellers. Many of the issues remain unchanged, but occasionally a new question will make its way into the list. As an example, for the past two years, inquiries about foreclosures and short sales have become more noticeable. According to Park Service reports, each year several million people visit the Cape Hatteras National Seashore. Quite a few choose to spend some of their well-deserved vacation time talking with my real estate colleagues and me about property in Hatteras Island’s seven villages. While each person’s specific needs and interests are different, a number of surprisingly similar questions arise during these conversations. Some of the most commonly asked questions and their answers are presented below. Question. We are just starting to consider buying property. Do you have any recommendations for a game plan? Answer. Hatteras Island is a very special place, and each of its villages has its own novel charm. My advice is to visit each of the villages, drive around, and let your feelings be your guide. Usually, one or two areas will appeal to you more than the others. Once you find the location that feels right for you, then start to clarify price ranges that meet your criteria and zero-in on the “perfect” property. Q. What does real estate cost on Hatteras Island? A. There are properties to meet just about every need and every budget. Be aware that prices may vary among the villages. - Oceanfront homes are priced from $160,000 to $1.98 million. Lower priced homes usually have some special conditions or concerns like erosion or ocean overwash. - Current asking prices for oceanfront lots begin around $415,000 and peak at $1.07 million. - Oceanside and soundside lots start around $29,995, and cottages range from $125,000 to $1.42 million. - Soundfront homes cost $330,000 to $2.5 million. - Soundfront lots are available for $135,000 to $1.4 million. - Canalfront homes reflect asking prices from $199,000 to $795,000 - Depending upon location and size, condominiums range in price from $91,250 to $579,000. When annual rental income is taken into account, the cost of owning a cottage on Hatteras Island can be surprisingly affordable. Q. How has the Hatteras Island real estate market performed over the past few years? A. Over the long term, the real estate market on Hatteras Island has rewarded property owners with substantial returns on their investments. As the real estate market has weakened, the average selling prices of houses and unimproved lots have declined, although some movement toward price stabilization has been seen this year.
Q. Is it better to buy an existing cottage or to purchase a lot and build? A. There is no one answer to this question that is right for everyone. Some feel more comfortable with the construction process than others. My general advice is that if you find an existing home that you really like, go ahead and purchase it. If none of the homes you see is truly what you want, then buy a lot and build a home that reflects your personal tastes. While there are a number of variables to take into consideration, in today’s market, you may be able to purchase an existing home for less than the cost of buying a lot and building a new home. Q. If I should decide to build a new home, what can I expect it to cost? A. Construction prices for new homes are currently about $125 per square foot. A complex design and upgraded features can raise the cost of construction even higher. The cost of the lot, furniture, and any amenities would be added to reach the total price. We have well-qualified builders, and the North Carolina building code for coastal properties is considered to be quite strict. Q. How difficult is it to obtain financing for real estate purchases on Hatteras Island? A. For qualified buyers, financing is available through a wide selection of lenders. In mid-July, 30-year fixed-rate mortgages were available with interest rates as low as 4.75% with the payment of one point or less. Loan amounts higher than $417,000 carried an interest rate of 5.625% with the payment of one point or less. A point equals one percent of the loan amount. Interest rates today are reported to be at their lowest point in the last 50 years. You should be aware that underwriting standards have increased across the spectrum of loans, especially for loan amounts over $417,000 and for unimproved lot loans. In addition, the borrower’s credit profile can have a significant impact on the ease or difficulty associated with loan underwriting. Q. What role are foreclosures and short sales playing in the Hatteras Island real estate market? A. The growth in the number of foreclosures and short sales certainly bears watching both for its influence on our local market as well as being a measure of the effectiveness (or ineffectiveness) of governmental and private efforts to stem the tide of families losing their properties. The number of new residential foreclosure filings on the island was 6.3 percent higher during January through June of this year compared to the same period in 2009. Through the end of June, foreclosures represented about 23 percent of residential sales, and short sales (situations where the mortgage balance is more than the value of the property) accounted for 22 percent of sales. In total, about 45 percent of all residential sales were distressed properties. While comparatively small in terms of absolute numbers, the presence of foreclosures and short sales in the market, combined with an excess of supply in relation to buyer demand, have contributed to a decline in selling prices. Purchasing foreclosed properties and short sales can be more challenging than a traditional purchase, so be sure to seek the assistance of a real estate agent who is familiar with these types of transactions to guide you through the process. Q. How does it work if we want to rent our cottage when we are not using it? A. There are professional real estate firms on Hatteras Island, which for a fee will provide a comprehensive property management program. Services include advertising your cottage, scheduling rentals, cleaning, maintenance and all necessary accounting. Once you make the decision to rent, they will take care of just about everything else. Oceanfront and soundfront houses generally rent for 25 to 28 weeks per year with some select homes exceeding the 28 week performance. Soundfront properties will rent a few weeks less. Oceanside and soundside cottages usually experience somewhat fewer rental weeks, depending on their distance from the water and the amenities that are offered. Prime waterfront properties have the highest occupancy rates and generate the greatest rental incomes. Q. How difficult is it to get flood insurance on Hatteras Island? A. There should be little, if any, problem getting flood insurance coverage for most properties on Hatteras Island. In fact, there are some locations in which flood insurance may not be required. Flood insurance is available through both the National Flood Insurance Program (NFIP) and private insurance companies. You should also be aware that there are some areas on the island where flood insurance offered through the National Flood Insurance Program is not available. This is an important fact to know when purchasing a home, since the cost of private flood insurance can be substantially higher than the cost of an NFIP policy. Q. What is the current situation concerning the availability of water and sewage services? A. The Dare County Water System provides central water service to all villages on the island, although private wells are still in use in some locations. A new central water system for Rodanthe, Waves and Salvo was completed in 1996, and a reverse osmosis plant in Frisco provides water service to the southern villages. Private septic systems are the standard method for waste disposal on Hatteras Island, although at least one community has a central sewage treatment facility. Q. How many year-round residents are there on Hatteras Island? A. The 2000 census results indicated that the population of Hatteras Island is 4,001. Interestingly, the number of full-time residents on Hatteras Island has remained fairly constant. In 1990 the census reported 3,814 island residents. The populations by village were reported as: Rodanthe, Waves, and Salvo 567; Avon 792; Buxton 1,163; Frisco 845; Hatteras 634. Q. It is my impression that Hatteras Island experiences severe weather. What can you tell me about weather conditions? A. While it is true that Hatteras Island from time to time does experience severe weather, if you think about it, so does just about every place else in the country! The perception that we get more than our fair share may, in part, be the result of the prominence of Cape Hatteras as a geographic landmark and the fact that it is frequently used as a reference point by weather forecasters. Statistically, the experts say that on average the Outer Banks will experience weather that has the potential to cause damage about three times a year. A recent study by the National Oceanic and Atmospheric Administration estimated that, based on historical records, a major storm strikes the island about every 11 years. The weather on the island is normally quite pleasant. We get generous amounts of rainfall. The wind averages about 11 mph, and the average temperature is a comfortable 69 degrees. Believe it or not, according to National Weather Service records, the official temperature on Hatteras Island has never reached 100 degrees! The highest temperature ever recorded was 97. Constantly changing weather patterns are a part of life on Hatteras Island. From my perspective, the number of warm, sunny days and star-filled nights far outweigh the concerns created by the strong storms that have been a fascinating part of the island’s history. Q. Is now a good time to buy? A. After experiencing double-digit rates of appreciation for several years, the average selling prices of properties have declined. Prices on Hatteras Island offer a very strong value relative to other resort areas along the east coast. This is an excellent time to be a buyer on Hatteras Island. An abundant supply of homes for sale means that an attractive selection of properties is available for buyers’ consideration, and the purchasing environment is less stressful with fewer buyers in competition with each other. In addition, sellers may be more willing to make concessions during contract negotiations. Interest rates remain at historically low levels, and the average price of residential properties has declined about 40 percent since 2005, making homes more affordable. All things considered, there are encouraging signs that our local market is on the road to recovery. • The average selling price of residential properties is moving closer to the historical growth curve that we saw prior to the boom years. • Residential supply/demand curves are starting to trend slowly toward each other after being relatively flat for a few years. • The number of monthly residential sales is starting to increase. • The Hatteras Island Pending Home Sales Index, a leading indicator of future sales, has remained above its long term downward trend for the past 13 months. When all is said and done, there is no place like Hatteras Island! (Tom Hranicka is an associate broker with Outer Beaches Realty. Questions, comments, or suggestions for future articles may be sent to Tom Hranicka at P.O. Box 237, Avon, NC 27915, or e-mail to hranicka@hatterasisland.com ) CopyrightŠ2010 Tom & Louise Hranicka. All rights reserved. |
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